Agricultural loans are any loans that are availed by a farmer to fund seasonal agricultural operations or related activities like animal farming, pisci-culture or purchase of land or agricultural tools. While seasonal agricultural operations routine activities like include preparing and ploughing land for sowing, weeding, and transplantation where necessary, buying inputs such as fertilizers, seeds, insecticides etc. and engaging labour for cultivating and harvesting the crops.
In addition purchasing of land, or purchasing of agricultural tools, storage of produce and transport also are included under purview of agricultural loans.
The agricultural policy of the Government of India also envisages substantial credit flow to increase agricultural production and productivity. Banks provide agricultural term loans to farmers for investment purposes and Short Term Loans for production purposes. There is a need to finance farmers for purchasing land not only to expand their activities but also to make existing small and marginal units economically viable, diversify their present activities and to bring fallow lands and waste lands under cultivation.
In India, agriculture has been marked as priority sector because farmers constitute a large part of the population. As such agriculture sector qualifies for priority sector lending at lower interest rates by banks. In India, most of the commercial banks, co-op societies and rural banks provide agricultural loans to farmers.
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The interest rates charged for agricultural loans can vary significantly based on the type of loan scheme that is opted for and your choice of lender. That said, the interest rates for agriculture loans start at about 8.80% p.a. In addition to the interest rate, agriculture loan borrowers will also have to pay a one-time processing fee which can range from nil to up to 2% of the loan amount, if not more.
Before you borrow an agriculture loan, it is necessary to calculate the payable EMI. You can do this using on an online EMI calculator by entering certain details such as your loan amount, loan tenure, interest rate, and processing fee. Once you key in these details into the calculator, the monthly EMI that you will need to pay will be displayed. You may also be able to view the amortisation details/loan repayment schedule.
If you are looking to apply for an agriculture loan, it is advisable to research your options online and apply for a loan of your choice by visiting the nearest branch of a lender. When visiting the branch, ensure that you carry the required documentation along with you to quicken the application process.
Certain lenders may also give prospective borrowers the option to apply for an agriculture loan online through their official websites. In this case, you will need to navigate to the respective website, click on ‘Apply Now’, enter the required details in the application form, and upload the necessary documents onto the website.
Regardless of the channel that you choose, the lender will verify your application and approve it. Once your application gets approved, the loan amount will be disbursed into your account.
A number of lenders today, offer a range of agriculture loans for the benefit of their customers. The various purposes for which you can avail an agriculture loan are as follows:
The key features and benefits of agriculture loans are as follows:
The documents that you may be asked to submit at the time of applying for an agriculture loan are as follows:
The eligibility criteria to borrow an agriculture loan will vary based on the type of loan scheme that you opt for. The generalised eligibility criteria, however, are as follows:
Yes, banks do extend loans to farmers for purchasing lands. However, banks usually finance purchase of land within a radius of 3 to 5 Kms of their residence or within village boundary.2. Can I pre-close my agriculture loan before the completion of the loan tenure
Most lenders will allow you to prepay the outstanding loan balance and pre-close the loan amount before the completion of the loan tenure. However, you may need to pay a pre-closure penalty to the lender.3. What are the different stages involved in the process of availing an agriculture loan
The key stages involved in the process of availing an agriculture loan are as follows:
Submission of application form and relevant documents Lender processes the application Loan amount is sanctioned Loan amount gets disbursed into the customer’s savings account4. How long do lenders take to process agriculture loan applications
The time required to process your application will vary based on the lender’s terms and conditions. That said, most lenders take around 7 days to process loan applications.5. Will I need a guarantor to avail an agriculture loan
Yes, most lenders will require you to have a guarantor.6. Can loan be availed for purchase of land
Yes, banks do extend loans to farmers for purchasing lands. However, banks usually finance purchase of land within a radius of 3 to 5 Kms of their residence or within village boundary.7. Who can apply for such land purchase
Farmers who own less than 2.5 acres of irrigated land or 5 acres of non-irrigated land, i.e-marginal and small farmers-are eligible to buy land by availing a bank loan. Sharecroppers and tenant farmers can also be covered under the scheme.8. Can loans be availed for purchasing land in the name of women
Yes, it is possible. As per Govt policy women owning land could lead to their empowerment. Hence, purchase of land in women can be financed and preference can be given to women in distress, SHG members and widows etc.9. What are the other allied activities eligible for agricultural loan
In addition purchasing of land, or purchasing of agricultural tools, storage of produce and transport also are included under purview of agricultural loans.10. How much agricultural loan can be availed without any security
To encourage institutional borrowing among farmers, banks have relaxed security or collateral for agricultural loans.
As per RBI directive, crop loans till an amount of Rs. 1 lakh require no security. Loans over Rs. 1 lakh may require security as per the lending banks terms and conditions.
Similarly, there is no margin for loans for purchase of land up to Rs 50,000 and amounts higher than this require a margin of 10%. The land is supposed to mortgaged in favour of the Bank and is considered the security.
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